Yesterday's opinion by the Court of Justice for the European Union (CJEU) [which was abbreviated in yesterday's post using the former acronym ECJ] affirmed Advocate General Kokott's advisory opinion with regard to the substantive legal questions at issue in the case. Consequently, our analysis of the Court's opinion remains consistent with our earlier posts in response to the October advisory opinion. Nonetheless, we offer a few brief observations:

The CJEU was more clear and forceful than the Advocate General in its pronouncement that the EU is not bound by the Chicago Convention. While the Advocate General also concluded that the Chicago Convention does not bind the EU, she acknowledged that the participation of all EU Member States in the Convention merited at least some consideration, stating that "[The Chicago Convention] must nevertheless be taken into account when interpreting provisions of secondary EU law. As a consequence, the Advocate General went on to analyze the compatibility of the ETS with a number of relevant Convention Articles. The CJEU, by contrast, spent little time discussing the Convention, instead focusing almost exclusively on customary international law principles and the US/EU Open Skies Agreement. Anyone who is of the belief that the Chicago Convention should retain some legal significance within the EU would have to be even more disheartened by the CJEU's opinion than by that of the Advocate General.

The Court was apparently unimpressed by the arguments that the proposed application of the ETS would violate other States' sovereignty over their airspace or prohibitions against extraterritorial regulations. In the Court's view the regulations clearly only affect aircraft that are properly within the EU's territorial jurisdiction. The opinion included only one sentence on the question of whether that regulation had improper extraterritorial effects.

Judging by the amount of attention devoted to each legal question and the clarity with which the question was answered, the Court appeared least sure of itself when addressing the question of whether the required surrendering of emissions allowances constituted an improper fuel tax. The Court concluded that the indirectness of the market-based mechanism by which the aircraft operators are charged saved the ETS from qualifying as a fuel tax, but it was much less dismissive than it had been with the other arguments.

Blog authors Brian F. Havel and John Q. Mulligan will provide an expanded analysis of the CJEU and Advocate General opinions in an article for the Spring 2012 issue of Air and Space Law. Details about the article will be forthcoming.

Earlier this morning the European Court of Justice issued its ruling on the EU's aviation emissions plan, confirming the advocate general's opinion and pronouncing Directive 2008/101/EC valid. The text of the opinion is available here. More analysis to come.

Last month the UK Department for Transport released a Draft Civil Aviation Bill that would rewrite the regulatory framework for the UK aviation industry. The text of the Bill is available from the Department for Transportation here. The Department appears to have identified four objectives to be achieved through its proposed regulatory changes: transferring regulatory authority to the Civil Aviation Authority (CAA), shifting regulatory costs to the industry, providing greater flexibility to regulators and prioritizing consumer interests. When possible, we'll expand on these thoughts in a later post.

The merger between LAN and TAM airlines has moved one step closer to completion, as Brazil's Administrative Council for Economic Defense (CADE) gave its approval. See Brazil Approves TAM-LAN Merger, Associated Press, Dec. 15, 2011 (available here). Chile's antitrust regulators granted conditional approval in September. The approval from CADE is conditional on a reduction in flights between Sao Paulo and Santiago as well as the selection of an international alliance for the new carrier.

An interesting news item in Reuters yesterday indicated that Chinese airlines had been instructed not to participate in the EU's Emissions Trading Scheme (ETS). See David Stanway and Ken Wills, China Aviation Body Urges Members Not to Cooperate with EU CO2 Scheme, Reuters, Dec. 15, 2011 (available here). According to the report, Wei Zhenzhong, the secretary general of the China Air Transport Association, has instructed airlines not to submit CO2 monitoring plans to European officials. China and the United States have been the most strenuous objectors to the EU's claimed authority to include foreign carriers in the program. This latest news out of China resembles earlier legislation passed by the U.S. Congress, though unlikely to become law, prohibiting U.S. carriers from participating in the EU scheme. The article also quotes Chinese officials as considering retaliatory measures and an eventual legal challenge.

The Star Alliance Chief Executive Board has selected former United Airlines Senior Vice President Mark Schwab to be the organization's new CEO. See Star Alliance press release, Dec. 14, 2011 (available here). Schwab, who had previously served on Star Alliance's Management Board when he was with United, replaces Jaan Albrecht who became CEO of Austrian Airlines in November.

An interesting item last week from RT suggests Russia may be considering dramatic changes in aviation policy as a result of recent high-profile crashes. See Open Sky Program May Give Russian Airline Companies a Dare, RT, Dec. 7, 2011 (available here). According to the article, authorities are expected to allow Czech Airlines and Air Baltic to provide air services for the Russian ice hockey league, to prevent a repeat of September's tragic crash involving the Yaroslavi team. The article also suggested that foreign airlines might be allowed to operate domestic services generally within Russia. While it is not clear whether the grant of eighth (consecutive cabotage) or ninth (stand-alone cabotage) freedom rights is under consideration, either would be a significant development. Outside of the EU and Australia, cabotage rights are practically non-existent for a market Russia's size.

That question is asked and answered in a new article by Brian F. Havel and Gabriel S. Sanchez in the most recent issue of Issues in Aviation Law and Policy. The article is now available for download at SSRN here.

On Tuesday, the U.S. Department of Transportation announced that the United States had signed an Open Skies agreement with Montenegro. See Press Release, U.S. DOT, Dec. 6, 2011 (available here). It is the first air transport agreement between the two countries and the 105th Open Skies agreement for the U.S.

International Aviation Law Institute Director Brian F. Havel was asked to participate in a Room for Debate forum about American Airlines' bankruptcy filing in today's New York Times. His contribution can be found here.

Contrary to the widely held belief that the Court of Justice of the European Union (CJEU) would not deliver its final decision until sometime in 2012, after the EU's new regulations on aviation emissions are scheduled to take effect, it is now being reported that the decision will come two weeks from today. See Barbara Lewis and Nina Chestney, EU Court to Rule on Airline CO2 Cap December 21, Reuters, Dec. 6, 2011 (available here). The safe guess right now is that the opinion will adhere closely to the analysis contained within the Advocate General's October 6 advisory opinion. We have discussed that opinion at length on the blog over the past two months and have provided links to external, and often contrary, evaluations of the opinion. For blog readers interested in what to anticipate from the CJEU, we recommend browsing the archives going back to October 6. We'll be certain to provide analysis of the final opinion when it is delivered.

Earlier today the British Government announced that, despite objections from airlines and travel and tourism groups, the Air Passenger Duty (APD) will increase by eight percent next year, and will be broadened to include passengers on private business jets. See Oliver Smith, Air Passenger Duty: Government Rejects Changes to Aviation Tax, Daily Telegraph, Dec. 6, 2011 (available here). The tax was first introduced in 1994 and has been billed as an environmental measure. However, with aviation emissions on the verge of being capped by the EU's Emissions Trading Scheme, it is far from clear that the APD will produce greater emissions reductions than those already expected under the cap. The government's ongoing need for revenue seems a more likely reason behind the increase.

In our Nov. 16 post we linked to a report that the Indian government was considering loosening restrictions on foreign ownership of airlines. A new report today provides a few more details on the changes that now appear likely. See, Anand Katti and Madhura Katti, India Seeks U.S. Investment to Boost Aviation Sector, Aviation International News Online, Dec. 5, 2011 (available here). According to the article, the government intends to allow foreign carriers to invest in Indian carriers, and is debating whether the permitted level of investment should be capped at 24 or 26 percent. More significantly, the report suggests the government may permit foreign investors unaffiliated with foreign airlines to take a majority ownership share, a rarity in international aviation.

The European Commission announced a variety of proposals aimed at better utilizing existing EU airport capacity, reducing delays, and improving the quality, efficiency and transparency of certain airport services and management functions. See European Commission press release, "Better Airports" Package Launched, Dec. 1, 2011 (available here). The most notable change is to rules regarding slot distribution. Airlines will now be better able to trade slots with one another. Additionally, the minimum threshold required for an airline to retain capacity to its slots under the "use it or lose it rule," which previously required airlines to use their slots at a minimum of 80% capacity, will be raised to 85%. Additionally, the package includes measures intended to improve ground handling services and increase the transparency in the decision-making process surrounding noise limits around airports. Before the measures can take effect, they must first be approved through the co-decision procedure involving the European Parliament, European Council and national Parliaments.

There is officially one month left until the aviation industry becomes subject to the EU Emissions Trading Scheme. The initiative has been a subject for discussion at the ongoing climate summit in Durban, with China, Japan and Venezuela all publicly criticizing the measure. See Allesandro Vitelli and Randall Hackley, China, Japan Clash With EU Over Aviation CO2 Curbs at Summit, Bloomberg Business Week, Nov. 30, 2011 (available here). From our vantage point it's impossible to predict what impact the Durban talks will have on the plan to include aviation in the EU scheme. Perhaps the EU could gain concessions from other nations on broader climate initiatives by scaling back its plans for aviation. Alternatively, intransigence from non-EU States on non-aviation climate change solutions might strengthen EU leaders' belief that unilateral emissions regulations are necessary.

A potential complication emerged yesterday with the report that ICAO hopes to coordinate a global agreement on aviation emissions over the course of the next year. The article we linked to in yesterday's post implied optimism on the part of ICAO secretary general Robert Benjamin that a deal could be reached in that time frame. See Alessandro Vitelli and Mathew Carr, UN Aviation Regulator Presses for 2012 Carbon Market Deal, Bloomberg, Nov. 30, 2011 (available here). The secretary general's comments also provided potential answers to two key questions that had been plaguing aviation emissions talks: who would administer the regulations and will developing nations be subject to different rules? With regard to administration, Benjamin suggested that the World Bank would be tasked with setting emissions targets and collecting fees or charges. As far as developing nations are concerned, Benjamin's comments indicated support for treating nations equally. This is one of the most difficult issues in any global emissions debate and is especially tricky for aviation where the Kyoto Protocol's "common but differentiated responsibilities" framework conflicts with the prohibitions against discrimination contained in the Chicago Convention. This very issue was examined by Joanne Scott and Lavanya Rajamani in a paper we called attention to a few weeks ago. See EU Climate Change Unilateralism: International Aviation in the European Emissions Trading Scheme (Nov. 1, 2011) available from SSRN here. The issue will undoubtedly be a source of great debate before an agreement is reached. Indeed a story today quoting comments from ICAO spokesman Denis Chagnon only clouded matters, as Chagnon made ICAO's intention of securing an emissions agreement next year sound more aspirational than firm, and implied that there was not yet a set plan decisively addressing the two issues Benjamin weighed in on.

So what does the latest news from Durban and ICAO mean? The prospect of ICAO successfully negotiating a deal next year, after struggling to do so for the past decade, seems overly optimistic. However, the likelihood of success will undoubtedly increase if non-EU nations spend 2012 complying with the EU scheme and see a global agreement as a way to regain control over regulation of their carriers in future years. Thus, the clearest takeaway appears to be that barring a last-minute change-of-heart by the EU, the ETS will begin to affect aviation January 1 as scheduled and foreign carriers will have little choice but to comply. While ICAO recently reiterated its opposition to the EU's approach, this recent announcement is a strong indication that ICAO views a global agreement as the best, and perhaps only, way out of the current impasse. There does not appear to be any interest in having ICAO decide an Article 84 challenge to the ETS. China has indicated it will file a lawsuit challenging the EU directive before the end of the year, but it is still unknown where the challenge will be filed or whether it will involve any distinct legal claims from those brought by U.S. carriers earlier this year. The outcome of the U.S. challenge, and resolution of the forthcoming Chinese challenge will both come after the new ETS rules have taken effect. While some retaliation by non-EU states is likely, diplomatic relations between the EU and its trade partners appear certain to be dominated by more urgent matters over the coming weeks and it is hard to see the aviation emissions issue making its way to the forefront. Our best prediction right now is that no alternative will be reached before the EU rules on aviation emissions take effect. Once the regulations are in place and their impact can be assessed, the severity of that impact will likely determine the lengths non-EU States are willing to go to find an alternate solution.